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Demanding HESSA to offer Rehabilitation for defaulted NJCLASS Loans

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The New Jersey Higher Education Student Assistance Authority ("HESAA") is the guarantor of roughly $1.6 billion in student loans and state aid to students of New Jersey.  HESAA's role in administering the NJCLASS loan has been one of preying on unsuspecting borrowers, trapping them into student loans they know can never be repaid, and crushing futures. HESAA is a profit making entity hawking high interest loans that carry monthly payments unsustainable for recent college graduates. HESAA does everything they can to default borrowers by failing to send consistent monthly billing statements; failing to respond to written billing inquiries/disputes; and an outright refusal to work with or assist struggling borrowers who want to pay their NJCLASS loans, but are unable to meet HESAA's enormous minimum payment, all of which allow HESAA to easily default NJCLASS loans, especially those borrowers who have Option III NJLCLASS student loans. 

A defaulted NJCLASS borrower has nowhere to turn. The borrower essentially has just three choices after their loan defaults: first, they can work with HESAA’s collection attorney and make payments though him/her who will add a collection fee of up to 30% to the balance that one already could not afford; second, they can file a Chapter 13 Bankruptcy, which will "stay" the collection action for up to 5 years and allow the borrower to pay what s/he can afford through the Bankruptcy Trustee; and third, a borrower can spend an exorbitant amount of money in an attempt to litigate the matter, but chances are, they will not prevail.  Let's fact it, this is a State of New Jersey "student" loan program--who is going to side with the borrower?  

The NJCLASS student loan program is administered in accordance with N.J.A.C. 9A:10-6.18, et seq., which provides for rehabilitation as follows: “(c) An NJCLASS borrower may request the rehabilitation of the borrower’s defaulted NJCLASS Loan Program....The borrower shall make one voluntary full payment each month for 12 consecutive months to be eligible to have the defaulted loans rehabilitated.” Under section (d) it further states, “the maximum period for a rehabilitated NJCLASS Loan Program loan....shall be the same as that of the [NJCLASS] loan prior to default.  A borrower who wishes to rehabilitate a loan in which a judgment has been entered must sign a new promissory note. 

Although, the Administrative Code under which HESAA administers the NJCLASS student loan  has a provision for REHABILITATING a defaulted NJCLASS loan, HESAA outright refuses to offer rehabilitation, and claims they cannot because they are “not authorized by either statute, or the bond indentures that fund NJCLASS loans. And, the regulations were written into the Administrative Code prospectively to allow for a NJCLASS rehabilitation program in the event that statute and market conditions change to allow for the issuance of bonds to finance rehabilitation."  This reasoning is incredible. 

The National Council of Higher Education Resources, of which HESAA is a member, has included a provision for the rehabilitation of non-federal student loans in their proposal for the upcoming Reauthorization of the Higher Education Act. HESAA claims they prospectively amended their regulations so that they could offer rehabilitation when or if the law does change. But, they currently do not offer rehabilitation because the federal law does not allow for it.  While 34 C.F.R. 682.405 and 34 C.F.R. 682.211(f) prohibit non-federal student loan lenders from removing a default from a borrower’s credit history; however, that is NOT AT ALL a statement that federal law prohibits non-federal student loan lenders from offering rehab programs – to the contrary, it clearly recognizes that HESAA is permitted.

The NJCLASS student loan program, as it operates today, has transformed away from the original intent of the NJCLASS program created in 1995, which was to promote and enhance  the “general welfare, health and prosperity of the people of the State of New Jersey…making higher education available to the greatest number of students possible.”  In 1995, NJCLASS loans were limited to a maximum amount each year, which prohibited a borrower from over-borrowing to allow for payments that remain affordable.  Today, HESAA lends as much as you request with no questions asked, as long as you add a cosigner.  Why? Because they know the borrower will never be able to afford the enormous minimum monthly payments, but the cosigner can--and that is exactly who they will go after if you miss or are late on just one payment.  It is apparent that Your NJCLASS loan was NOT approved on your ability to repay, but rather the cosigners’ ability to repay.   

The New Jersey State Legislature has expanded the unregulated power enumerated to HESAA to collect on defaulted loans, resulting in HESAA's outright refusal to provide default aversion to its borrowers.  I mean really, why would HESAA work with their borrowers when they have unfettered authority to garnish both yours and your cosigner’s wages and intercept State Income Tax Refunds.

The NJCLASS loan default total reported in March 2012 was $153,343,416. Just two years later, in February 2014, HESAA, the NJCLASS student loan default total increased 46.628% to a whopping $224,844,408 (February 2014).  This mammoth increase brings home the very fact that NJCLASS student loan borrowers are struggling to meet their minimum monthly payments. The significant increase in defaults also evidences that HESAA has failed to assist NCLASS loan borrowers by providing more affordable repayment options and adequate default aversion

It’s obvious that HESAA has and continues to ignore that the NJCLASS student loan program, in its present state, is failing the college graduates of New Jersey; setting them up for a lifetime of failure; and an inability to become productive members of society by grossly delaying their ability to contribute to the economy in any meaningful way. 

NJCLASS loan borrowers are expected to make fixed principal and interest payments just 60 days after they graduate. However, what HESAA fails to recognize is that most college graduates are not immediately taking jobs that mimic their lifetime earnings. The fact is, many college graduates take internships, and nearly all have periods of unemployment. And, this most recent generation graduated during the worst recession this country has seen since the Great Depression. Recent college grads are not immediately earning their lifetime income in fixed monthly payments over 20 years.  Instead, they initially earn less and then more later. Evidence suggests that a repayment system, mimicking the actual reality college grads face throughout their lives, a system that adjusts over time, would prevent many needless student loan defaults.  The increase in NJCLASS student loan defaults between March 2012 and February 2014 evidences the unrealistic expectations in HESAA’s minimum monthly payment requirements. 

NJCLASS student loan borrowers are not asking for their debt to be cancelled--they just want a more affordable way to repay their NJCLASS student loans. Defaulted NJCLASS loan borrowers are demanding HESAA to immediately offer rehabilitation of defaulted NJCLASS student loans and defaulted borrowers with default judgments. NJCLASS loan borrowers want a chance in obtaining the American Dream; they want out of this nightmare!!

NJCLASS student loan debt and the rise in defaults is a crisis facing the recent college grads of this State. NJCLASS loan borrowers can no longer sit idly by and allow HESAA to remain a spectator in their own game. Time is up. HESAA must take action NOW and do what is right!!!


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